[Williams e-mailed me yesterday
about a front-page screed in Sunday's Washington Post by Edward
Luttwak, a more-or-less conservative bigdome who normally writes about
national security out of Georgetown's Center for Strategic and International
Studies. Luttwak spends several thousand words denouncing the idea that
inflation is a bad thing, repeating arguments I had not heard in 15 or 20
years. Luttwak turns out to be a neo-Keynesian who thinks Alan Greenspan
should realize that any inflation below 8% a year should be okay.]

I
read the Luttwak piece at your suggestion and found it pitiful. It is amazing
something that silly can find its way to the front page of The Washington
Post's "Outlook" section. Edward Luttwak has never been involved in
economic debates before, as far as I can remember, but I see he is writing a
book about capitalism. I shudder. The things he says were conventional wisdom
25 years ago, the Tobin idea that a little bit of inflation greases the wheels
of commerce, for example. And that wages are sticky in a downward direction.
Stupid stuff, we should have learned by now.

Your question about
pre-Keynesian economics having such little currency in the academy is a good
one. The fact is, supply-side economics is now dominant in the political
realm, in the business world, and in the political world, except that few
people have made that bald an admission. Alan Greenspan is practically the
embodiment of supply-side economics, which is one reason Luttwak, recalling
his adolescent lessons in Keynes 101, is so furious at him. Dole is "far
right" because he embraced Jack Kemp. Clinton is only "right" because he
embraced Greenspan.

In fact, if Keynes were alive, he would be much
happier with the supply-siders than with those who oppose us in the name of
"neo-Keynesianism," by which they mean they are so "neo," that they disagree
with Keynes. It will take another generation before the revolution is
complete. All the wise men who still lead these various schools first will
have to expire, thereby liberating their students to reattach themselves to
more relevant schools of thought.

Ordinary people were always
pre-Keynesian, which is why they elected Reagan in 1980. They elected Bush
because he promised he was pre-Keynesian, although he wasn't. They bounced him
because he wasn't. They elected Clinton because he promised to become
pre-Keynesian. They re-elected him because he tried, and because nobody
believed Bob Dole when he said he finally saw the pre-Keynesian light. Next
comes Kemp vs. Gore.